The Government has said it has been in discussions with the failed airline, EuroManx, for some time.
Transport Minister David Anderson says the talks were hampered by the difficulty in getting in touch with the parent company, Quest.
Chief Minister Tony Brown says he very much regrets today's news. The priority, he says, is now to help passengers affected.
He says the Government will do all it can to make alternative arrangements in a " difficult time for the staff". The government would provide all the assistance and advice it could to help them get new jobs.
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